ACCA F8 - Audit and Assurance Revision Kit 2016

Extract from Balotelli’s non-current assets register
Original Depreciation Accumulated Charge for Carrying
Date
Description
cost
policy depreciation the year value
$ $ $ $
1 May 20X4 15 treadmills 18,000 36 months SL 0 4,000 14,000
15 May 20X4 20 exercise bikes 17,000 3 years SL 0 5,667 11,333
17 August 20X4 15 rowing machines 9,750 36 months SL 0 2,167 7,583
19 August 20X4 10 cross trainers 11,000 36 months SL 0 1,528 9,472
55,750 0 13,362 42,388
In order to verify the depreciation expense for the year, you have been asked to perform a proof in total. This
will involve developing an expectation of the depreciation expense for the year and comparing this to the
actual expense to assess if the client has calculated the depreciation charge for the year correctly.
What is the expected depreciation expense for the above assets for the year ended 31 December 20X4
and the resultant impact on non-current assets?
A
B
C
D
Depreciation should be $10,660, assets are understated
Depreciation should be $18,583, assets are understated
Depreciation should be $9,111, assets are overstated
Depreciation should be $12,549, assets are overstated
7 The audit assistant who has been assigned to help you with the audit work on non-current assets has
expressed some uncertainty over why certain audit procedures are carried out and specifically is unsure
what procedures relate to the valuation and allocation assertion.
Which of the following audit procedures are appropriate to test the VALUATION assertion for non-current
assets?
(1) Ensure disposals are correctly accounted for and recalculate gain/loss on disposal
(2) Recalculate the depreciation charge for a sample of assets ensuring that it is being applied
consistently and in accordance with IAS 16 Property, Plant and Equipment
(3) Review the repairs and maintenance expense accounts for evidence of items of a capital nature
(4) Review board minutes for evidence of disposals during the year and verify that these are
appropriately reflected in the non-current assets register
A 1 and 2
B 1, 3 and 4
C 2, 3 and 4
D 2 and 3 only
Food poisoning
Balotelli’s directors received correspondence in November 20X4 from a group of customers who attended a
wedding at one of the company’s hotels. They have alleged that they suffered severe food poisoning from food
eaten at the hotel and are claiming substantial damages. Management has stated that based on discussions with
their lawyers, the claim is unlikely to be successful.
Mock exam 3 (Specimen exam): questions 245